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Can bailout save Monte dei Paschi?

Friday, December 23, 2016 - 01:51

The Italian government has approved a decree to bail out Monte dei Paschi di Siena after the world's oldest bank failed to win investor backing for a desperately needed capital increase. Ciara Lee asks whether the bailout will be enough to fix the ailing lender.

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Swooping in to the rescue - Italy's government approves a plan to bail out stricken bank Monte dei Paschi. It comes after the world's oldest bank failed to win investor backing for a life-saving capital increase. Hoping to end the crisis, new Prime Minister Paolo Gentiloni said a 20-billion-euro fund has been approved to help lenders in distress. (SOUNDBITE) (Italian) ITALY'S PRIME MINISTER PAOLO GENTILONI SAYING: ''I think this intervention is certainly important in that it achieves the objective of making our banking system stronger and more solid." Within minutes of the announcement, Monte dei Paschi, Italy's third largest lender, said it would request state aid, paving the way for the country's biggest bank nationalisation in decades. (SOUNDBITE) (English) LONDON CAPITAL GROUP, SENIOR MARKET ANALYST, JASPER LAWLER, SAYING: "It obviously stops the immediate liquidity problem that they announced that they only had 4 months left just earlier this week rather than the previously stated 11 months. It gets over that initial problem but still obviously it doesn't cover all the non performing loans. Probably another bailout is going to be necessary further down the road and it's going to reach a point in time where it's fully state owned and it's just a nationalised bank or it's left to go to the wall." Monte dei Paschi emerged as the weakest of some 51 European banks subjected to stress tests earlier this year by the ECB. A collapse of the lender would have threatened the savings of thousands of Italians and could have hit the wider banking sector. If the government uses all 20 billion euros it is authorised to spend on the banking sector, it will worsen the country's already difficult debt position. It's standing at 133 percent of gross domestic product - second only to Greece in the euro zone.

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Can bailout save Monte dei Paschi?

Friday, December 23, 2016 - 01:51